Leasehold Rip-Offs: does the CMA reach the parts that other agencies cannot?

[by Tola Amodu] Many years ago, there was an advertisement on TV suggesting that a certain alcoholic beverage – those showing their age will know which one – “refreshed the parts other beers cannot reach”. In a similar vein, it is just possible that the Competition and Markets Authority will manage to do something similar in the case of the sale of leasehold houses. The recent CMA report probing the activities of house builders and developers has focused on the unfair treatment of homeowners and the possible misleading of prospective buyers. Will the CMA be more effective than specific legislation for redressing the problem?

“Facts” from thin air in the CMA Chairman’s letter requesting greater powers?

(by Bruce Lyons) I recently posted a blog commenting on the CMA’s proposals for reform. I was sympathetic with the aims of eliminating unfair pricing and inefficient decision processes. However, I was highly critical of the CMA’s direction of travel and the worrying side effects of their proposals. I suggested two alternative proposals that would directly address the aims without the harm. In this short blog, I pick up two “facts” used by Lord Tyrie, Chairman of the CMA, to motivate the need for reform. These are particularly important because they relate to exactly the type of statistical evidence relied on by the CMA in its daily competition analysis: concentration and margins.

Why the CMA is wrong in its proposals for reform and what should be done instead

(by Bruce Lyons) The Chairman of the CMA, Lord Tyrie, has written a 44-page letter (including annex) to the Secretary of State for Business, Greg Clark, setting out a long list of legislative proposals.[1] Two motivations are given: “First, the growth of new and rapidly-emerging forms of consumer detriment, caused in part by the increasing digitalisation of the economy, requires more rapid intervention, and probably new types of intervention… Second, there are increasing signs that the public doubt whether markets work for their benefit.” I agree with the spirit of these points and that they require action. However, I disagree with some of the CMA’s key proposals. Lord Tyrie appears particularly frustrated with the lengthy appeals system which limits his ability to act firmly and swiftly. Unfortunately, the overall package of proposals would reverse hard-won progress in competition policy over the last 20 years and lead to a paternalistic, arbitrary and unrestrained Consumer Interest Authority. In this blog, I briefly explain some of my concerns. I then set out two alternative proposals that would more directly and appropriately address public concerns over unfair pricing and result in better decisions without prolonged appeals.

The deterrence value of competition policy can and should be measured

(by Steve Davies) In a post last year, I argued that it was time for competition economists, both academics and practitioners, to start seriously tackling one of the big unknowns: how much harm is deterred by Competition Law and the Competition Authorities (CAs)? In this blog I pull together some results from three recently completed papers on cartel deterrence. I believe that these importantly move forward our understanding of this great unknown, and merit exposure to a non-academic audience in a non-technical way.

We have three ‘headline’ results.

Should I always hire the best-ranked lawyer?

(by Chris Hanretty) Rankings, ratings and reviews are common in life.

They claim to tell us which are the best films, the best albums, even the best universities.

Ratings are particularly useful for credence goods — goods the quality of which we poor consumers can’t judge.

Law is a good example of a credence good. I might hire a lawyer to represent me in court. I might even attend the court hearing. But I’d have no way of telling whether the lawyer’s arguments were good or bad. If I knew which arguments were good or bad, I could probably have saved some money and represented myself.

It’s therefore no surprise to see that there are lots of rankings for lawyers in the UK. One company (Chambers & Partners) is particularly known for ranking barristers — the kind of lawyers who earn their crust standing up and arguing cases in court.

Does this mean that you should always try and get the best-ranked barrister to represent you?